When US President Donald Trump imposed on imported goods on April 2, 2025 – upending global trade and sending markets – he presented the move as a response to a crisis. In released the same day, the White House said the move was necessary to address “the national emergency posed by the large and persistent trade deficit.”

A – when a country imports more than it exports – is often viewed as a problem. And yes, the US trade deficit is both large . Yet, as who has taught international finance at Boston University, the University of Chicago and Harvard, I maintain that far from a national emergency, this persistent deficit is actually a sign of America’s financial and technological dominance.

A trade deficit sounds bad, but it is neither good nor bad.

It doesn’t mean the US is losing money. It simply means foreigners are sending the US more goods than the US is sending them. America is getting more cheap goods, and in return it is giving foreigners financial assets: dollars issued by the Federal Reserve, bonds from the US government and American corporations, and stocks in newly created firms.

That is, a trade deficit can only arise if foreigners...